Dollar the Global currency

by Capital Stars Financial Research Advisory

A global currency is one that is accepted for trade throughout the world. Some of the world's currencies are accepted for most international transactions. The most popular are the U.S. dollar, the euro, and the yen.

Out of these Dollar is the most popular one. Before the advent of currencies, transactions occurred through something called the ‘barter system’. Barter system is a ‘method of exchange’ which has existed for many centuries. In a typical barter, people exchange goods for other goods (or services).

Then came the Goods for metal era. Gold and Silver were the most popular; therefore eventually these metals became the standard for transactions. The direct exchange between gold/silver and goods lasted for many centuries; however things started to change when people deposited gold and silver coins in safe havens and issued a ‘paper’ against the value of gold. This paper derived its value based on the gold/silver coins deposited in the safe haven.

With time, safe havens evolved to banks and the paper transformed to different currencies. Perhaps this was the start of the book entry of the currency system.

Then Bretton Wood System came in picture. The BWS was a way of defining the monetary relationship between countries, where the currencies were pegged to USD at a fixed rate while the value of the USD itself was marked against the value of Gold.

As BWS came in existence the USD became the currency the world transacted in, as USD was backed by Gold.

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